Just one of those days....

Macro Man hates days like this. Yesterday's stunning equity rally had him licking his chops, ready for another day of risk-taking. You've got to love a market where a firm that has a huge profits miss (Citigroup) actually rallies on hopes that they finally turf out their muppet-like chief executive (Chuck Prince.) So Macro Man went to bed last night looking forward to getting stuck in today.

Instead, the market is awash with bogus rumours, leaps of logic that would do Bob Beamon proud, and chasing after will-o'-the-whisps and noise. Macro Man came into the office to see profit-taking in short dollar trades, long commodity trades, and long carry trades. Strangely, however, equities have remained resilient.....so pardon him if he doesn't get overexcited about getting out of good trades at crappy levels. Among the talking points this morning include the following:

* The ECB to intervene in EUR/USD? 'Twould be an odd course of action while monetary policy is still 'accomodative.' Unfortunately, gents, overvaluation is a natural and inevitable product of reserve currency status- just ask America (and Britain.) Europe may well complain about the euro at the forthcoming G7....but it is virtually inconceivable that the US will lift a finger to help out, given that America is fighting its own currency battle with China.

* UK banks borrowing from the ECB? Muckraker and sensationalist extraordinaire Ambrose Evans-Pritchard attempts to foment new concerns after noting that UK banks might actually borrow from the ECB. This chap appears consitutionally unable to write a story without injecting dime-novel subplots and hinting at looming crisis. For those with spare time in search of a giggle, read the reviews of his 1990's book on Bill Clinton, wherein he claims that the former president ran a Colombia-syle drug ring, complete with death squads, from his Arkansas power base. Unsurprisingly, most reviews give the book either one or five stars, depending on the political persuasion of the reviewer.

* Vladimir Putin as Russia's PM? The modern-day Beria looks set to tighten his grip on power. Just goes to prove that you can take the Chekist out of the Kremlin....but you can't keep him out. What odds that Russia's next president develops (plutonium-related?) health problems fairly early in his reign, er, administration?

* Sundry concerns that oil, gold, and other commodities are cruisin' for a bruisin'. No real explanations are being offered, and it rather smacks of the brokerage community attempting to monger a scare, and by extension a trade. Apparently the more that firms lose on subprime and fixed income, the more they are being encouraged to "cross-sell" to drum up volume and mitigate some of the losses. Macro Man will take a pass, thanks.

Later today, he hopes to write up some of his findings on the large cap-small cap RV trade. In the meantime, he will bid 1.4135 spot basis for another €20 million EUR/USD. If markets want to get excited about noise, it would be rude not to take the other side...

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MM,on Russia: The beauty of Putin becoming prime minister would be that - given his popularity, the predictable overwhelming control of his party in parliament, and the Russian constitution - he really will be in charge as long he makes sure that the next president is politically relatively weak. If there are strong parties, the Russian system is closer to the German one than one would think from the situation in recent years. Hence no need for Plutonium or the like - which would go down very badly with the West anyway. And Putin does care about not becoming a Pariah in the West.

Yeah, the plutonium bit was a bit of a gag. Clearly the whole point would be to install a puppet president that Putin could manipulate from behind the scenes. I'm not sure how much he cares about his image with the West, other than projecting Russian strength (viz. bomber test flights to the edge of UK airspace.)

In any event, for better or worse, strikes me as a character that could have come straight from the Soviet Union of the 30's and 40's...at least as depicted on the book sitting on my bedside table...

It's a G10 basket, so SGD isn't eligible. In any event, as a managed peg the SGD isn't even liable to funding currency capital losses (like the yen and Swissie), as the primary criterion of its valuation is the currencies in the basket.

As Macro Man has found to his chagrin in his real job, the Sing is a lot more about the dollar and the basket than it is about carry....

Aha, thanks for explaining the yellow-stained background of AEP. Annoyingly, his articles make the rounds in Tokyo hours and you have to explain to some traders why they're absurd. Nevermind that he always seems to quote a certain breathless and equally sensationalist FX strategist/BS artist. I guess AEP doesn't realize how the modern banking system works, eh?